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Making a Crypto Utopia in Puerto Rico

Brock Pierce inside the former Children’s Museum

in Old San Juan, P.R., which he and his colleagues hope to make part of a crypto utopia where the money is virtual and the contracts are all public. Credit Erika P. Rodriguez for The New York TimesSAN JUAN, P.R. — They call what they are building Puertopia. But then someone told them, apparently in all seriousness, that it translates to “eternal boy playground” in Latin. So they are changing the name: They will call it Sol.

Dozens of entrepreneurs, made newly wealthy by blockchain and cryptocurrencies, are heading en masse to Puerto Rico this winter. They are selling their homes and cars in California and establishing residency on the Caribbean island in hopes of avoiding what they see as onerous state and federal taxes on their growing fortunes, some of which now reach into the billions of dollars. And these men — because they are almost exclusively men — have a plan for what to do with the wealth: They want to build a crypto utopia, a new city where the money is virtual and the contracts are all public, to show the rest of the world what a crypto future could look like. Blockchain, a digital ledger that forms the basis of virtual currencies, has the potential to reinvent society — and the Puertopians want to prove it.

For more than a year, the entrepreneurs had been searching for the best location. After Hurricane Maria decimated Puerto Rico’s infrastructure in September and the price of cryptocurrencies began to soar, they saw an opportunity and felt a sense of urgency.So this crypto community flocked here to create its paradise. Now the investors are spending their days hunting for property where they could have their own airports and docks. They are taking over hotels and a museum in the capital’s historic section, called Old San Juan. They say they are close to getting the local government to allow them to have the first cryptocurrency bank.

“What’s happened here is a perfect storm,” said Halsey Minor, the founder of the news site CNET, who is moving his new blockchain company — called Videocoin — from the Cayman Islands to Puerto Rico this winter. Referring to Hurricane Maria and the investment interest that has followed, he added, “While it was really bad for the people of Puerto Rico, in the long term it’s a godsend if people look past that.”

Puerto Rico offers an unparalleled tax incentive: no federal personal income taxes, no capital gains tax and favorable business taxes — all without having to renounce your American citizenship. For now, the local government seems receptive toward the crypto utopians; the governor will speak at their blockchain summit conference, called Puerto Crypto, in March. The territory’s go-to blockchain tax lawyer is Giovanni Mendez, 30. He expected the tax expatriates to disappear after Hurricane Maria, but the population has instead boomed. “It’s increased monumentally,” said Mr. Mendez, who has about two dozen crypto clients. “And they all came together.”

Cryptocurrency investors have flocked to San Juan in recent months, hunting for property where they could have their own airports and docks, and taking over hotels and a museum in the Puerto Rican capital’s historic district. Credit José Jiménez-Tirado for The New York TimesThe movement is alarming an earlier generation of Puerto Rico tax expats like the hedge fund manager Robb Rill, who runs a social group for those taking advantage of the tax incentives.

“They call me up saying they’re going to buy 250,000 acres so they can incorporate their own city, literally start a city in Puerto Rico to have their own crypto world,” said Mr. Rill, who moved to the island in 2013. “I can’t engage in that.” The newcomers are still debating the exact shape that Puertopia should take. Some think they need to make a city; others think it’s enough to move into Old San Juan. Puertopians said, however, that they hoped to move very fast. “You’ve never seen an industry catalyze a place like you’re going to see here,” Mr. Minor said.

The Monastery

Until the Puertopians find land, they have descended on the Monastery, a 20,000-square-foot hotel they rented as their base and that was largely unscathed by the hurricane. Matt Clemenson and Stephen Morris were drinking beer on the Monastery’s roof one recent evening. Mr. Clemenson had an easygoing affect and wore two-tone aviators; Mr. Morris, a loquacious British man, was in cargo shorts and lace-up steel-toed combat boots, with a smartphone on a necklace. They wanted to make two things clear: They chose Puerto Rico because of the hurricane, and they come in peace. “It’s only when everything’s been swept away that you can make a case for rebuilding from the ground up,” Mr. Morris, 53, said.

“We’re benevolent capitalists, building a benevolent economy,” said Mr. Clemenson, 34, a co-founder of Lottery.com, which is using the blockchain in lotteries. “Puerto Rico has been this hidden gem, this enchanted island that’s been consistently overlooked and mistreated. Maybe 500 years later we can make it right.” Other Puertopians arrived on the roof as a pack, just back from a full-day property-hunting bus tour. From the middle, Brock Pierce, 37, the leader of the Puertopia movement, emerged wearing drop crotch capri pants, a black vest that almost hit his knees and a large black felt hat. He and others had arrived on the island in early December.

Mr. Pierce, center, with Josh Boles, left, and Matt Clemenson on the roof of the Monastery, a San Juan hotel that has been rented out as the entrepreneurs’ temporary headquarters. Credit José Jiménez-Tirado for The New York Times“Compassion, respect, financial transparency,” Mr. Pierce said when asked what was guiding them here. Mr. Pierce, the director of the Bitcoin Foundation, is a major figure in the crypto boom. He co-founded a blockchain-for-business start-up, Block.One, which has sold around $200 million of a custom virtual currency, EOS, in a so-called initial coin offering. The value of all the outstanding EOS tokens is around $6.5 billion.

A former child actor, Mr. Pierce got into digital money early as a professional gamer, mining and trading gold in the video game World of Warcraft, an effort funded partly by Stephen K. Bannon, the former Trump adviser. Mr. Pierce is a controversial figure — he has previously been sued for fraud, among other matters. Downstairs, in the Monastery penthouse, a dozen or so other expats were hanging out. The water was out that night, so the toilets and faucets were dry. Mr. Minor lounged on an alcove chaise.

“The U.S. doesn’t want us. It’s trying to choke off this economy,” Mr. Minor said, referring to the difficulties that crypto investors have with American banks. “There needs to be a place where people are free to invent.” Mr. Pierce paced the room with his hands in fists. A few times a day, he played a video for the group on his phone and a portable speaker: Charlie Chaplin’s 1940 “The Great Dictator,” in which Chaplin parodies Hitler rallying his forces. He finds inspiration in lines like “More than machinery, we need humanity.”

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The daily Bits newsletter will keep you updated on the latest from Silicon Valley and the technology industry, plus exclusive analysis from our reporters and editors. You agree to receive occasional updates and special offers for The New York Times's products and services. “I’m worried people are going to misinterpret our actions,” Mr. Pierce said. “That we’re just coming to Puerto Rico to dodge taxes.” He said he was aiming to create a charitable token called ONE with $1 billion of his own money. “If you take the MY out of money, you’re left with ONE,” Mr. Pierce said. “He’s tuned in to a higher calling,” said Kai Nygard, scion of the Canadian clothing company Nygard and a crypto investor. “He’s beyond money.”

The former Children’s Museum. For entrepreneurs, Puerto Rico offers an unparalleled tax incentive: no federal income taxes, no capital gains tax and favorable business taxes without having to renounce American citizenship. Credit Erika P. Rodriguez for The New York Times The force of Mr. Pierce’s personality and his spiritual presence are important to the group, whose members are otherwise largely agnostic. Mr. Pierce regularly performs rituals. Earlier that day while scoping out property, they had stopped at a historic Ceiba tree, known as the Tree of Life.

“Brock nestled into the bosom of it and was there for 10 minutes,” Mr. Nygard said. Mr. Pierce walked around the tree and said prayers for Puertopia, holding a rusted wrench he had picked up in the territory. He kissed an old man’s feet. He blessed a crystal in the water, as they all watched. He played the Chaplin speech to everyone and to the tree, Mr. Nygard said.

That wrench is now in the penthouse, heavy and greasy. Later on, at a dinner in a nearby restaurant, the group ordered platters of octopus arms, fried cheese, ceviche and rum cocktails. They began debating whether to buy Puerto Rico’s Roosevelt Roads Naval Station, which measures 9,000 acres and has two deepwater ports and an adjacent airport. The only hitch: It’s a Superfund cleanup site.

Mr. Pierce had fallen asleep by then, his hat tilted down and arms crossed. He gets two hours of sleep many nights, often on a firm grounding mat to stay in contact with the earth’s electric energy. Josh Boles, a tall, athletic man who is another crypto expat, picked him up, and the group headed back to the Monastery. They walked past a big pink building in an old town square, the start of their vision for Puertopia’s downtown. Once a children’s museum, they plan on making it a crypto clubhouse and outreach center that will have the mission “to bring together Puerto Ricans with Puertopians.”

The Vanderbilt

Workdays are casual in Puertopia. One morning, Bryan Larkin, 39, and Reeve Collins, 42, were working at another old hotel, the Condado Vanderbilt, where they had their laptops on a pool bar with frozen piña coladas on tap. “We’re going to make this crypto land,” Mr. Larkin said. Mr. Larkin has mined about $2 billion in Bitcoin and is the chief technology officer of Blockchain Industries, a publicly traded company based in Puerto Rico.

Mr. Collins, an internet veteran, had raised more than $20 million from an initial coin offering for BlockV, his app store for the blockchain, whose outstanding tokens are worth about $125 million. He had also co-founded Tether, which backs cryptocurrency tied to the value of a dollar and whose outstanding tokens are worth about $2.1 billion, though the company has generated enormous controversy in the virtual currency world. “So, no. No, I don’t want to pay taxes,” Mr. Collins said. “This is the first time in human history anyone other than kings or governments or gods can create their own money.”

Mr. Pierce and Mr. Boles sitting with Robert Anderson, right, at the Monastery, which was left largely unscathed by Hurricane Maria last year. Credit José Jiménez-Tirado for The New York Times He had moved from Santa Monica, Calif., with just a few bags and was now starting a local cryptocurrency incubator called Vatom Factory. “When Brock said, ‘We’re moving to Puerto Rico for the taxes and to create this new town,’ I said, ‘I’m in,’” Mr. Collins said. “Sight unseen.” They soon went back to work, checking out Coinmarketcap.com, a site that shows the price of cryptocurrencies. “Our market cap’s gone up $100 million in a week,” Mr. Collins said. “Congrats, man,” Mr. Larkin said.

Welcome, Puertopians?

All across San Juan, many locals are trying to figure out what to do with the crypto arrivals. Some are open to the new wave as a welcome infusion of investment and ideas. “We’re open for crypto business,” said Erika Medina-Vecchini, the chief business development officer for the Department of Economic Development and Commerce, in an interview at her office. She said her office was starting an ad campaign aimed at the new crypto expat boom, with the tagline “Paradise Performs.” Others worry about the island’s being used for an experiment and talk about “crypto colonialism.” At a house party in San Juan, Richard Lopez, 32, who runs a pizza restaurant, Estella, in the town of Arecibo, said: “I think it’s great. Lure them in with taxes, and they’ll spend money.”

Andria Satz, 33, who grew up in Old San Juan and works for the Conservation Trust of Puerto Rico, disagreed. “We’re the tax playground for the rich,” she said. “We’re the test case for anyone who wants to experiment. Outsiders get tax exemptions, and locals can’t get permits.” Mr. Lopez said the territory needed something to jump-start the economy. “We have to find a new way,” he said. “Sure then, Bitcoin, why not,” Ms. Satz said, throwing up her hands. Mr. Lopez said he and a childhood friend, Rafael Perez, 31, were trying to set up a Bitcoin mine in their hometown. But electricity has been inconsistent, and mining even a single Bitcoin takes a lot of power, he said.

Bitcoin tumbles as cryptocurrency
sell-off intensifies

Cryptocurrencies plunged on Friday,

with bitcoin at one point sliding below $8,000 and headed for its biggest weekly loss since December 2013, as worries about a regulatory clampdown globally sent investors scrambling to sell.The currencies have come off their lows but analysts said the sell-off was probably not over.

This week’s slump brought the total market value of cryptocurrencies down to around $400 billion, half the high it reached in January, according to industry tracker Coinmarketcap.com. The market value of cryptocurrencies is calculated by multiplying the number of digital coins in existence by their price, although many question whether that is the right way to value them. Bitcoin, the biggest and best-known cryptocurrency, fell as much as 15 percent on Friday to a two-month low of $7,625 on the Luxembourg-based Bitstamp exchange BTC=BSP. It clawed back some losses and was down around 4.1 percent at $8,623.50 in mid-morning New York trading. The virtual currency is down by close to 25 percent this week and almost 40 percent in 2018.

The second and third largest virtual currencies, Ethereum and Ripple, also plunged more than 20 percent at the session low, Coinmarketcap.com said. Ethereum was last down 18.2 percent, at $913.37, while Ripple last traded at 80 U.S. cents, down 16.7 percent. Retail investors have poured money into digital coins, enticed by the huge run-up in prices. Regulators say cryptocurrencies are highly speculative and dangerous investments. On Thursday, India vowed to eradicate the use of crypto-assets, joining China and South Korea in promising to ban parts of the nascent market where prices have boomed in recent years.

Social media website Facebook (FB.O) said this week it would ban cryptocurrency advertisements because many were associated with misleading or deceptive promotional practices. U.S. regulators have sent a subpoena to two of the world’s biggest cryptocurrency players, Bitfinex and Tether “The growing confusion revolving around the Indian government’s view on cryptocurrencies sparked uncertainty, consequently exposing bitcoin to downside risks,” said Lukman Otunuga, research analyst at FXTM. “Price action suggests that bears are clearly in control, with further losses on the cards as jitters over regulation erode investor appetite further,” he added.

A massive $530 million hack of a Japanese cryptocurrency exchange last week renewed worries about the security of the industry. Critics of virtual currencies have called the run-up in prices a speculative bubble, but supporters of cryptocurrencies say short-term price volatility is to be expected, and the blockchain technology underpinning these assets maintains its power and value. Going back to 2011 and including the current selloff, bitcoin’s price has been halved nine times on the Bitstamp exchange before recovering. The last time was from November 2014 to January 2015.

in the 24 hours to press time, Thursday, Feb.1, as fresh volatility in Bitcoin undermines previous sideways growth. Cross-exchange data from CoinMarketCap shows the broad copycat effect of Bitcoin’s drop on altcoin markets. Only six altcoins in the top 50 had made 24-hour gains at press time, with these nonetheless trending downwards.

Bitcoin faces renewed pressure after India’s finance minister Arun Jaitley announced a crackdown on “illegitimate activities” involving cryptocurrency in his 2018 budget speech this morning. Jaitley also stated that the government does not recognize crypto as legal tender and would seek to freeze out crypto from the “payments network”. However, industry participants claim his words do not mark any real change in India’s regulatory perspective.

Others, such as BitTorrent creator Bram Cohen, decried negative press attention on India as “FUD”, short for fear, uncertainty and doubt. Nonetheless, alternative viewpoints were enough to send Bitcoin below $10,000 again Thursday, with new lows centring just below $9600 on averaged readings. Bitcoin is trading at an average of $9,609 at press time, down almost 7 percent today.

Running parallel to the news from India is an ongoing narrative surrounding the impact of Tether’s token supply on Bitcoin prices. After a curious second market reaction to news that Tether and associate exchange Bitfinex had received subpoenas from regulators in December, analysts are casting doubt on previous assumptions that Tether’s issuance was artificially raising BTC/USD rates.

“Given $USDT stores $2.2B in value — currently 0.4% of aggregate crypto value & 1.3% of total bitcoin value — have a hard time believing it could be systematically propping up these markets,” Placeholder VC partner Chris Burniske wrote earlier Thursday in a series of tweets on the subject.

on crypto from India’s finance minister Arun Jaitley, made during his most recent budget speech in the Parliament today, Feb.1. After Jaitley noted in his speech that cryptocurrency is not legal tender in the country and promised a crackdown on “illegitimate activities” involving crypto, a flood of misinterpreted comments warning of an outright ban appeared across the mainstream press and social media.

Markets in turn fell in trading on Thursday, Bitcoin dipping below $9,512 after breaking $10,300 Wednesday, Jan. 31, data from Bitstamp shows. India has been sporadic in its attempts to formalize cryptocurrency regulation over the past two years. Since the country’s currency reforms, interest in Bitcoin especially has skyrocketed, with local exchanges reporting huge growth. At the same time, India’s central bank has issued repeated warnings on cryptocurrency investment, some of which appeared tantamount to calling it illegal.

During his budget speech today, Jaitley stated:

“The government does not recognise cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these cryptoassets in financing illegitimate activities or as part of the payments system.”

While Jaitley’s speech noticeably avoided any mention of legality of crypto in and of itself, commentaries by third parties and mainstream media journalists controversially claimed that a ban was imminent. “Arun Jaitley has just killed India’s cryptocurrency party,” Quartz’s article on the subject proclaims, citing a lawyer who expects “a legislative mechanism or… suitable amendment in existing legislation to ensure that dealing and trading in cryptocurrency is made illegal and to penalise entities and individuals who are involved in their trade and circulation.”

On Twitter, the curious reading of Jaitley’s words continued, with declarations of Bitcoin being “illegal” and soon to be “eliminated.” From within the industry, however, sources told an altogether different story. Crypto exchange Unocoin summarized that there had been “no change” in government perspective since the budget speech. “It is business-as-usual,” it added in its most recent twitter activity. Cointelegraph correspondant Joseph Young also posted on his personal Twitter about the FUD in mainstream media surrounding the finance minister’s comments:

India on Blockchain

In line with previous government initiatives, Jaitley similarly produced no surprises with his commitment to expanding the use of Blockchain technology at the state level going forward. “The government will explore use of blockchain technology proactively for ushering in the digital economy,” he said in his speech.

South Korea’s finance minister said the government has no plans to shut down cryptocurrency trading, welcome news for investors worried that authorities might go as far as China’s tough action in blocking virtual coin platforms.

FILE PHOTO:

Broken representation of the Bitcoin virtual currency, placed on a monitor that displays stock graph and binary codes, are seen in a illustration picture, December 21, 2017. REUTERS/Dado Ruvic/Illustration/File Photo. The comment by Kim Dong-yeon on Wednesday comes as traders at home and around the world have been spooked by conflicting comments from government officials in South Korea, a major hub for cryptocurrency trade, that Seoul was planning to ban local digital coin exchanges.

“There is no intention to ban or suppress cryptocurrency (market),” Kim said, adding the government’s immediate task is to regulate exchanges. Reinforcing Seoul’s intent to tighten the screws on a market widely seen as opaque and risky by global policymakers, the country’s customs earlier on Wednesday announced it had uncovered illegal cryptocurrency foreign exchange trading worth nearly $600 million.

“Customs service has been closely looking at illegal foreign exchange trading using cryptocurrency as part of the government’s task force,” it said. South Korea has been at the forefront of pushing for broad regulatory oversight of cryptocurrency trading as many locals, including students and housewives, jumped into a frenzied market despite warnings from policy makers around the world of a bubble. Seoul previously said that it is considering shutting down local cryptocurrency exchanges, which threw the market into turmoil and hammered bitcoin prices. Officials later clarified that an outright ban is only one of the steps being considered, and a final decision was yet to be made.

CRYPTO CRIMES

Customs said about 637.5 billion won ($596.02 million) worth of foreign exchange crimes were detected. Illegal foreign currency trading of 472.3 billion formed the bulk of the cryptocurrency crimes, it said in a statement, but gave no details on what action authorities were taking against the rule breaches. In one case, an illegal FX agency collected a total of 1.7 billion won ($1.59 million) from local residents in a form of “electric wallet” coins to transfer it to a partner agent abroad. The partner agent then cashed them out and distributed the settlement to clients based in that country, according to the statement.

In South Korea, only licensed banks and brokers can offer foreign exchange services. Local companies and residents who move more than $3,000 out of the country at a time must submit documents to tax authorities explaining reasons for the transfers. Annual overseas transfers of more than $50,000 must also be reported with similar documents. Effective from Jan. 30, authorities imposed rules which allow only real-name bank accounts to be used for cryptocurrency trading designed to stop virtual coins from being used for money laundering and other crimes. Among other breaches, Customs said there were also cases where investors in Japan sent their yen worth 53.7 billion won to their partners in South Korea for illegal currency trade.

It said authorities will continue to monitor for any violations of foreign exchange rules or of money laundering activities. Bitcoin stood at $10,123.13 as of 0842 GMT on the Luxembourg-based Bitstamp exchange. The heightened regulatory scrutiny around the world, however, has seen bitcoin dive about 27.1 percent so far this month, on track for its biggest monthly decline since January 2015. Cryptocurrencies got another jolt last week after Tokyo-based exchange Coincheck said hackers stole over $500 million in one of the world’s biggest cyber heists.

Samsung’s now making chips designed for cryptocurrency mining

An ethereum mining rig in South Korea.

Samsung’s semiconductor business is booming, with the company recently overtaking Intel as the world’s biggest chipmaker. But the South Korean firm is not resting on its laurels, and is currently looking to expand into the buzziest contemporary market for processors: cryptocurrency mining.As reported by TechCrunch, Samsung has confirmed it’s in the process of making hardware specially designed for mining cryptocurrencies like Bitcoin and Ethereum. A spokesperson for the firm told TechCrunch: “Samsung’s foundry business is currently engaged in the manufacturing of cryptocurrency mining chips. However we are unable to disclose further details regarding our customers.”

These chips are known as ASICs, or application-specific integrated circuits. ASICs are processors that have been specially designed for a single computational task, as opposed to the multi-purpose processors we use in computers and phones. As the valuation of cryptocurrencies has shot up, so has the demand for these sorts of chips. In the case of bitcoin, the currency is created by solving mathematical problems, with these calculations also maintaining the integrity of bitcoin transactions. As more bitcoins are mined, these math problems become increasingly difficult. This has led to miners moving on from using normal integrated graphics cards, to GPUs designed for gaming, and now to specially built ASICs.

It’s not clear exactly what sort of products Samsung will be making, but according to reports from Korean media, it’ll be working with Taiwanese firm TSMC. The company currently supplies chips for a number of firms set up solely to mine cryptocurrencies, including the China-based Bitmain. Meeting the demand for these chips has added around $350 million to $400 million to its quarterly revenue, says TSMC. That’s nothing to be sniffed at, but it’s a small sum compared to the $69 billion revenue generated annually by Samsung’s chip business. Mining cryptocurrencies is buzzy, but that doesn’t mean it’ll be extremely profitable for those selling the silicon shovels.

Samsung made a special chip for mining cryptocurrency

Maybe don't expect GPU prices to drop anytime soon, though.

Samsung has a chip designed specifically for mining cryptocurrency.

Rather than repurpose a GPU to do the dirty work, Samsung made an Application Specific Integrated Circuit (ASIC), which is a specialized processor that is more efficient at mining than, say, an NVIDIA 1080 card. The company has entered into a distribution agreement with an as-of-now anonymous Chinese partner for distribution. As TechCrunch notes, this is significant for at least one reason: This gives the Korean company a way into the Chinese ASIC market, where local firms dominate. It's too early to tell what sort of impact (if any) this could have on Samsung's bottom line, or how it could affect cryptocurrency and China's local players.

UK:
Cryptocurrency Trader Robbed ‘At Gunpoint’, Amount Stolen Unknown

Four masked robbers have broken into the house

of a cryptocurrency trader in Moulsford, Oxfordshire and forced him to transfer all of his bitcoins to them “at gunpoint”, The Telegraph reports Sunday, Jan. 28. According to The Telegraph, this is the first case of cryptocurrency robbery in the UK. The criminals entered the house of a crypto trader and forced him to transfer his entire Bitcoin stash. The exact amount of bitcoins stolen has not yet been specified. Fortunately, the incident did not cause any serious injuries to anyone. The police immediately launched an investigation into the case, however, no arrests were made as of press time.

The police have also asked for help from local citizens:

"Officers are particularly interested in speaking to anyone travelling through [Moulsford] on the A329 Reading Road between 7.30am and 10.30am on Monday who has Dashcam footage or anyone with mobile phone footage.”

Due to their relatively anonymous nature, cryptocurrencies are becoming an increasingly popular target for robberies. Back in December 2017, Cointelegraph covered another case: the managing director of the cryptocurrency exchange EXMO Pavel Lerner was kidnapped in Kiev by an group of unidentified people. Fortunately, Lerner got out safely just two days later, albeit having to pay a ransom of $1 mln in bitcoins. Another robbery has taken place in neighboring Russia in mid-January, in which a locally famous cryptocurrency blogger was deprived of $425,000 worth of bitcoins. The latest news shows that cases of Bitcoin robbery aren’t limited to Russia and surrounding countries, as even the citizens of UK can be targeted by the criminals.

Fork Fail:
US Government Claims Bitcoin Cash
Is ‘Original’ Bitcoin

A US government institute has claimed Bitcoin Cash (BCH)

is the “original” Bitcoin while Bitcoin itself (BTC) is a “fork” in a surprising official research into cryptocurrency. In a document titled “Blockchain Technology Overview” from the National Institute of Standards and Technology under the US Department of Commerce, authors Dylan Yaga, Peter Mell, Nik Roby and Karen Scarfone claim that “technically,” the perception that BTC is the genuine version of Bitcoin is incorrect. “When SegWit was activated, it caused a hard fork, and all the mining nodes and users who did not want to change started calling the original Bitcoin blockchain Bitcoin Cash (BCC),”

they write.

“Technically, Bitcoin is a fork and Bitcoin Cash is the original blockchain. When the hard fork occurred, people had access to the same amount of coins on Bitcoin and Bitcoin Cash.”

The document makes for curious reading at a time when the cryptocurrency industry remains awash with propaganda and marketing activities from BCH and BTC representatives alike. Confusion for new users in Bitcoin has increased following July’s hard fork due to some major resources in the industry, notably Roger Ver’s Bitcoin.com, controversially allying with BCH.

More recently, two scandals involving BCH, mainstream news outlet CNBC and major US exchange Coinbase further dented BCH’s reputation. The US government document nonetheless appears unfazed by both the events and the nature of Bitcoin’s hard fork itself, continuing on to provide descriptions of other cryptocurrencies. Litecoin, authors say, is a “complement to Bitcoin,” while Ethereum Classic is underlined as the original version of “more popular” Ethereum. Last Week, ratings agency Weiss also caused a stir when it delivered its first cryptocurrency ratings, giving Bitcoin a ‘C+’ and Ethereum a ‘B.’

How blockchain could kill
both cable and Netflix

Blockchain technology, powered by nodes of peer-to-peer computers

around the world, is on the rise. So can we expect decentralized entertainment applications built on blockchain to replace streaming services like Netflix or Amazon and be the final death knell for Cable? Video production studios have already seen a lot of disruption recently. Websites like Youtube and Twitch have created a mass market for user-generated content, stripping the cable networks and studios from their positions as the sole creators of mass-market video content. Yet, despite the rise of these mega-websites, most high quality scripted entertainment content today, still comes via a largely centralized model. Studios and networks (now expanded to include streamers Netflix and Amazon) fund the development of content, and the content follows an orderly approach to distribution – from the studio to the end user along one of the pre-defined channels: cable or broadcast or mobile device or website.

Blockchain has the power to fundamentally disrupt the entertainment industry because it brings out a completely new, decentralized model for content distribution. In a blockchain, computers all over the world act together in a peer-to-peer network to work on some task — there is no central server or authority. Today Netflix and Cable still rely on the idea of “centralized” aggregation and distribution. Content creators must get past some number of “gatekeepers” and strike business deals with the network, which then puts the content on a server and distributes it over the air, via coaxial, or more recently, over the internet directly using CDNs (Content Delivery Networks like Akamai or Amazon CloudFront). Decisions about what content is offered, when it’s offered, the price, and the distribution route are still very proprietary and hierarchical.

In a decentralized world, no single website or authority would have a say over what content is to be distributed and how it will reach the “last mile.” No website would be able to block specific content. With decentralized apps (Dapps) for entertainment, whether it’s for live streaming or on-demand video, thousands of computers around the world would act as broadcasters in a mesh network that is not hierarchical. These “super nodes” would solve the last mile problem by broadcasting the signal to computers that are geographically nearby. This will be particularly effective in countries that don’t have lots of presence from existing CDNs.

A number of new crypto projects have cropped up that use either existing blockchains or completely new blockchains as infrastructure for decentralized video streaming. Some of these are optimized for ingesting and compressing content to make it available, such as LivePeer, built on the Steem blockchain, and Viuly, built on Ethereum. Some are application level tokens for streamers and influencers, such as Stream Token and YouNow/PROPS, both on Ethereum. Spectiv VR is focused on the advertising model and making sure content creators get a larger part of it, particularly for VR content. And LBRY and my company, Theta Labs, are building new blockchains/protocols to support third-party DApps for entertainment, esports, and more. Not only could these blockchain projects completely disrupt the distribution world because they no longer require centralized architectures, they can also disrupt the Netflixes of the world and make the idea of channels on cable completely obsolete. What is a channel but an aggregation of curated content over a well-defined distribution network?

Here are a few ways that a fully decentralized blockchain based entertainment network might disrupt the industry:

Free Up Content Creators. Content creators could create shows and make them available over a decentralized platform instantly – no need to go pitch a studio or try to get Netflix to put you on their system. No more gatekeepers that have to approve your content.

New Channels. New “channels” could emerge in a completely decentralized way. You could envision channels for esports, live events, fantasy, sci fi, news, etc. These channels could be set up by anyone and joined by content creators.

Advertising and Free Content. Free content could even disrupt the traditional TV advertising model (which sites like YouTube are also following) by using tokens on these networks. The new blockchain video projects usually provide coins or tokens that advertisers can use to buy exposure on these decentralized channels. They can specify that those coins go directly to the content creator without having to a middleman take a big chunk of the revenue — a large departure from existing practices where the middleman gets the biggest chunk.

Paid Content. As for paid entertainment or the subscription model, viewers could use the new tokens issued by decentralized content networks to subscribe to particular channels or to pay a particular content creator. This could replace cable on-demand and give viewers unlimited choice of what can be seen “on-demand.” HBO and other subscription networks recently released their own apps so you don’t need a cable subscription to watch them. The next HBO may be a completely decentralized network that is not tied to cable at all!

Conclusion: Watch out.

Technology changes have always impacted the entertainment industry. While the internet has created new ways to consume content, the creation and distribution of high quality shows has, for the most part, still been dominated by a small number of players, studios, TV networks, cable providers, and aggregators like Netflix. This hasn’t led to the democratization of content that was the promise of the internet.

Blockchain technology has the ability to fundamentally disrupt the entertainment industry by breaking that pseudo monopoly, replacing the centralized gate-keepers with a peer-to-peer network. Many of these projects will be going live towards the end of this year, and we can expect to see rapid growth of the new players in 2019 and 2020. Just as it took Netflix a number of years to displace Blockbuster and video rental stores as the dominant way to consume on-demand entertainment, it may take a number of years before the new decentralized approach becomes the dominant trend. Look to the 2020s to be the decade of blockchain in entertainment.

with popular currencies such as Bitcoin and Ethereum maintaining their popularity despite recent market corrections. At the core of both technologies is the cryptographically secure digital ledger known as the blockchain. It’s a digital ledger where cryptocurrency transactions are recorded chronologically and publicly. Indeed, as the popularity of cryptocurrencies has grown, so has the banking industry’s interest in blockchain for fintech, with an increased and focused push on bank-backed blockchain projects. Some of the largest projects underway include the IBM-backed Hyperledger Fabric project, the Utility Settlement Coin, and R3’s blockchain consortium, signifying a growing acceptance in institutional policy to support blockchain growth

How does it work?

Currently, banks transact with each other by creating agreements, as one would when purchasing an item from a store. A common example would be a bank agreeing to purchase a specific amount of stock for a specific cash price from another. This process, often cumbersome and slow, takes up to several days and incurs the risk that one party may default or renege on the agreement. This period of time, known as settlement, is such an issue that an Oliver Wyman report identified it as costing the financial industry anywhere from $65-$80 billion a year.

Blockchain projects have the potential to reduce, and possibly eliminate, settlement times due to their digital nature, ensuring the timely and secure processing of these operations. Other uses for bank-backed blockchain projects would include secured global currency exchange rate speeds and increased transaction security, among other benefits, eventually allowing for an overhaul of the banking industry, replacing traditional back-office clearinghouses and other outdated mediums that exist between asset sellers and buyers.

IBM’s Hyperledger Fabric

The IBM-backed Hyperledger Fabric project is a trade finance platform aimed at international payments utilizing blockchain, with seven of its largest supporters including Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societe Generale and Unicredit. IBM’s blockchain platform will run through the IBM Cloud, allowing for interconnectivity between all parties in a particular secure transaction. This project is designed to be highly scalable, allowing for multiple entrants to easily integrate into the entire financial supply chain process through the secure blockchain, allowing for an unprecedented amount of transaction transparency. In mid-October, IBM revealed a partnership with blockchain startup Stellar, spreading the influence of the Hyperledger Fabric project to global levels unseen before.

The Utility Settlement Coin

Six of the world’s largest banks, Barclays, CIBC, Credit Suisse, HSBC, MUFG, and State Street, have announced backing of the UBS and Clearmatics-spearheaded Utility Settlement Coin, joining other industry heavyweights who have already pledged their support for the project, including BNY Mellon, Deutsche Bank, and Santander. The UTC specifically tackles the use of blockchain technologies by traditional banks, utilizing it as a tool for more efficient transactions. Additionally, the UTC addresses the issue of currency backing, with the UTC being backed by cash at a central bank, preventing default and credit risk. These safeguards play a huge role in why the UTC has so much pledged interest, allowing banks to take part in the relatively young digital currency ecosystem. The UTC is definitely a sign of fintech adoption in the banking industry, ensuring the eventual wide-scale use of blockchain technologies on a standardized level across the globe.

R3

Blockchain consortium R3 is another player in the bank-based blockchain space, raising $107 million in May, with four of its backers being Temasek, SBI Group, Bank of America Merrill Lynch, and Intel, with further support pledged from industry heavyweights such as Wells Fargo and ING. One of R3’s primary projects has been the development of their Corda platform, with future plans for an infrastructure network specifically geared toward financial institutions to build their own ledger-based applications and services, implying that these banks currently have and will grow their own teams of blockchain developers. R3 is also focused on governmental acceptance of blockchain, with buy-in from these institutions signifying a drastic shift in terms of governmental compliance and usage of such fintech.

By presenting credible potential resolutions of current-day issues, these projects represent large-scale efforts by the banking industry to fully embrace and integrate blockchain into their current infrastructures. Industry consumers and participants alike should be excited to see how the industry develops in the next coming months.